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Informist, Thursday, May 7, 2026

By Shumaila Firoz 

MUMBAI – The one-day interbank call money rate closed below the Reserve Bank of India's repo rate after banks and primary dealers met their funding requirements, which had risen due to the outflow for excise duty, dealers said. The weighted average call rate – the operating target was monetary policy – was also below the repo rate.

Thursday, the one-day call money rate ended at 5.10%, unchanged from Wednesday and down from 5.25% at the open on Thursday. The weighted average rate was 5.18%, up from 5.17% from Wednesday. The volume in the one-day call contract was INR 170.69 billion, up from INR 156.65 billion Wednesday. The bulk of the increase came in the initial half hour of trade, before the RBI's variable rate repo auction, dealers said. 

"Rates eased during the day as demand for funds softened once participants arranged liquidity to meet these obligations," a dealer at a private-sector bank said. "Small banks and primary dealers had borrowed earlier in the session to cover requirements stemming from the T-bill auction and excise duty payments, but activity slowed after these needs were met."

Excise duty outflows were lower than expected, around INR 300 billion, compared with the usual payment of INR 400–500 billion after the government cut excise duty on petrol and diesel by INR 10 each in late March. "Our bank has paid the excise duty outflow today, and it was in line operationally, though the overall system outflow was lower than earlier estimates," the dealer quoted above said.

Dealers said the central bank's variable rate repo auction helped keep rates in check despite the high demand for funds early in the day. Primary dealerships had also sought to borrow for daily funding needs at a time when banks were unwilling, with demand and supply improving after the RBI's injection of liquidity, dealers said. The RBI accepted all bids worth INR 107.95 billion at the four-day, INR 750-billion VRR auction at the minimum cut-off rate of 5.26%. Banks found mutual funds willing to lend near the Standing Deposit Facility rate of 5.00% in the tri-party repo market and preferred to borrow there, dealers said. 

The one-day tri-party repo rate ended at 5.02% Thursday, down from 5.05% Wednesday. The weighted average rate was 5.08%, higher than 5.06% Wednesday. The volume in the overnight tri-party repo contract was INR 4.85 trillion, down from INR 4.95 trillion Wednesday. The tri-party rate opened at 5.02%, and traded in the range of 4.90% to 5.20%. 

The net liquidity absorbed by the RBI Wednesday – an indicator of surplus liquidity in the banking system – was INR 2.65 trillion, down from INR 2.80 trillion Tuesday. The liquidity surplus decreased as banks' cash balances with the RBI rose slightly and scheduled outflows drained INR 113.65 billion from the banking system Wednesday, dealers said.

OUTLOOK 

Friday, the three-day interbank call money rate is likely to open at 5.25–5.30% due to increased demand for funds from primary dealerships ahead of the weekly gilt auction, dealers said. The government will sell INR 340 billion of a new 10-year, 2036 gilt at auction 1030-1130 IST. The one-day call money rate is seen in the range of 4.90–5.35% during the day, while the tri-party repo rate is expected in the band of 4.95–5.15%.

Liquidity in the banking system is likely to remain comfortable, keeping money market rates at or below the repo rate of 5.25%, dealers said. The weighted average call rate is likely to be in the range of 5.10–5.25%, while that in the tri-party repo market is seen at 5.05–5.15%, dealers said. Banks are expected to remain on the borrowing side in the tri-party repo market to maintain their cash reserve ratio requirements, while primary dealerships may continue to rely on the call market for funds, they said. 
 

CALL RATE

5.10%--Thursday close for one-day loans

5.25%--Thursday open for one-day loans

5.10%--Wednesday close for one-day loans

BENCHMARK MIBOR (in %)  

Mumbai Interbank Outright Rates compiled by Financial Benchmarks India:

India Call: Below SDF rate, volumes down as demand eases post VRR auction 

MUMBAI – The one-day interbank call money rate was below the Reserve Bank of India's Standing Deposit facility rate of 5.00% as demand for funds eased, dealers said. Money market rates and volumes eased after the the central bank's four-day, INR 750-billion variable rate repo auction at 0930-1000 IST.

The RBI accepted all bids worth INR 107.95 billion at the VRR auction. Demand at the auction was poor as market participants found borrowing in the tri-party repo market cheaper, with the cut-off rate at the auction 5.26% and the tri-party repo rate near the SDF rate, dealers said. However, this neither raised the weighted average tri-party repo rate subsantially, nor the volume in the market.

"TREPS rates are near SDF, so banks are preferring that route instead of VRR," a dealer at a public sector bank said. Dealers said the auction was unexpected and not necessarily required as the scheduled outflows for INR 400 billion-INR 500 billion for excise from the banking system would have driven up the call rate above the repo rate Thursday, dealers said. 

The one-day tri-party repo market rate ended at 5.02%, the same as Thursday's opening, and down from 5.05% Wednesday. The weighted average tri-party repo rate was 5.08%, up from 5.06% Wednesday. Trade volume in the contract was INR 4.85 trillion, down from INR 4.95 trillion Wednesday.

At 1615 IST, the one-day call rate was 4.70%, down from Thursday's opening level of 5.25% and Wednesday's close of 5.10%. The weighted average call rate was 5.19%, up from 5.17% Wednesday. For the rest of the day, the call money rate is seen in the range of 4.70–5.20%, dealers said. 

Apart from excise duty payments, no major outflows are scheduled in the near term that could materially affect liquidity conditions, dealers said. Market participants do not expect further VRR operations from the RBI after the current auction matures on Monday due to a comfortable liquidity surplus and since cash balances with the RBI also running higher than regulatory needs for the fortnight. (Shumaila Firoz and Aaryan Khanna) 

India Call: At repo rate on heavy demand, volume jumps over four-fold

MUMBAI – The interbank call money rate for one-day loans opened at the Reserve Bank of India's repo rate of 5.25% due to heavy demand for funds and large outflows expected on account of the payment of excise duty, dealers said. Interbank call money traded volume so far in the day jumped more than four-fold to INR 54.62 billion from INR 10 billion at the same time Wednesday. Rates are expected to cool later in the day after the RBI conducts a four-day variable rate repo auction to infuse INR 750 billion into the banking system later in the morning.

"We do not expect the VRR auction to be fully subscribed, as the expected cut-off rate is around 5.26%, with the TREPS rate (tri-party repo rate) trading near the Standing Deposit Facility rate, there may be limited appetite for borrowing at such levels," a dealer at a public-sector bank said.

At 0930 IST, the one-day call rate was 5.25%, up from 5.10% Wednesday and the weighted average call rate was also 5.25%, up from 5.17% Wednesday. The one-day tri-party repo rate was 5.12%, up from 5.05% Wednesday. The weighted average rate for tri-party repos was 5.08%, up from 5.06% Wednesday. The volume in the tri-party repo market was INR 1.99 trillion, up from INR 1.60 trillion Wednesday. 

The net liquidity absorbed by the RBI Wednesday – an indicator of surplus liquidity in the banking system – was INR 2.65 trillion, down from INR 2.80 trillion Tuesday. The liquidity surplus decreased as banks cash balances with the RBI rose to INR 7.83 trillion Wednesday from INR 7.78 trillion Tuesday. The payment for the auction of state bonds worth INR 186 billion Wednesday also drained liquidity. 

Dealers said the RBI's announcement of a VRR auction after market hours Wednesday was unexpected given the comfortable liquidity surplus in the banking system. Market participants linked the move to the excise duty outflows scheduled for Thursday, which are estimated to drain around from the system and tighten liquidity.  (Shumaila Firoz) 

End

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

Edited by Deepshikha Bhardwaj

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